Despite COVID, it’s a good time to buy or sell

Q: I sold my house a couple of years back and I am ready to buy a replacement house.  How are interest rates? Is it a good market for buyers?

A: It is a great time to buy of course. Interest rates are historically low.  In fact, they are a full percent lower than they were last year at this time.  But there is both good and bad in this. was speaking to my favorite lender Jay Voorhees of JVM Lending. I am going to repeat some information from him.

The good. The enormous rate-reduction appears to be a huge boon for homebuyers, as low rates reduce payments and increase buying power.

A 1 percent reduction in rates reduces the payment on a $500,000 loan by almost $300 per month.

Even better, a couple earning$150,000 per year can qualify for a $100,000 higher purchase price with rates dropping by 1 percent.

Similarly, a borrower earning $75,000 per year can qualify for about $50,000 more when rates drop 1 percent.

Jay says, “Efficient market theory applies to many businesses and also applies to housing.”

Very low rates fostered by the gov’t policy are a subsidy of sorts, and they will push up the price of housing—again.

In the short run lower rates are definitely a gift for most borrowers, but over the long run, housing prices usually adjust to reflect the impact of lower rates.”

For instance, rates edged up this week in response to news about Russia possibly coming up with a COVID-19 vaccine.

If shaky news like that pushed rates up, imagine what more concrete vaccine news might do?

People ask could rates go lower? Jay answers “I think so but I am not sure because there are so many variables outside of our control.”

There are also unexpected factors-including higher fees from Fannie Mae, the gov’t agency which is involved in most loans. They just announced an additional ½-point fee for all refinance loans-which translates to about a 1/4 percent higher rate for those.

They say this is to account for the “extra risk” in the COVID-19 environment, but Jay suspects that has more to do with the monopoly pricing power.

As you might suspect there is huge pent up demand from buyers who have been on the sidelines, such as yourself, waiting to see what happens with COVID and interest rates.

July bidding wars jumped 5x from this time in 2019 and CoreLogic statistical site said housing prices jumped 4.9 percent from June to June.

I believe you should buy soon with the low interest rates because as I always say it is better to buy at a low interest rate than a low price.  It’s all about the payment.

Send your question and look for your answer in a future column. Email French is the broker/owner of Lynne French & Associates. Contact her at 672-8787 or stop in at 6200 Center St., Clayton.